Outerwall now expects 2015 core earnings from continuing operations to range between $7.65 per share and $8.15 per share, compared to earlier guidance between $8.82 per share and $9.52 per share. Revenue should range between $2.165 billion and $2.19 billion, down from the previous range between $2.205 billion and $2.24 billion.
Outerwall, which owns Redbox, Coinstar and New Ventures, pointed to disappointing performance by its DVD rental stand Redbox.
Although Redbox has already improved in the fourth quarter from the third quarter, it hasn't reached Outerwall's expectations and continues to be negatively impacted by "the historically low box office during the third quarter," according to a statement.
The company also blamed increased promotional spending and additional content purchases meant to persuade customers to "return to normal rental patterns."
"What's happened is they blamed the decline not on a secular decline but on theatrical releases - saying [the third quarter] was the worst in four years and that's why Redbox did poorly," TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning. "What really matters here is that Redbox has the most powerful competition on Earth," including Amazon.com (AMZN), Netflix (NFLX) and even cable providers that offer movies.
Additionally, Outerwall announced that Redbox president Mark Horak is leaving the company, and Outerwall CEO Erik Prusch will temporarily assume his responsibilities.
About 2.64 million shares of Outerwall have been traded so far today, well above the company's average trading volume of roughly 506,870 shares per day.
Separately, TheStreet Ratings team rates OUTERWALL INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate OUTERWALL INC (OUTR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 108.7% when compared to the same quarter one year prior, rising from $17.89 million to $37.34 million.
- Net operating cash flow has significantly increased by 72.40% to $85.56 million when compared to the same quarter last year. In addition, OUTERWALL INC has also vastly surpassed the industry average cash flow growth rate of 4.80%.
- OUTERWALL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OUTERWALL INC reported lower earnings of $5.71 versus $7.39 in the prior year. This year, the market expects an improvement in earnings ($9.20 versus $5.71).
- The gross profit margin for OUTERWALL INC is currently lower than what is desirable, coming in at 33.56%. Regardless of OUTR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.29% trails the industry average.
- OUTR has underperformed the S&P 500 Index, declining 17.85% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full analysis from the report here: OUTR
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.